Jio, Airtel could emerge stronger weakening Vodafone Idea further, say analysts

• Reliance Jio, Airtel and Vodafone Idea have all reported their Q1 FY23 results.
• While Jio leads in almost every important metric, its closest rival Airtel is still putting up a fight.
• Vodafone Idea has made some moderate improvements, but it still has a very long journey to make to become financially healthy again.

The Indian telecom market has become a three-way race with only two key players, a long time back. Backed by one of the top most Indian conglomerates, Vodafone Idea however has been languishing so bad, that its Q1 losses at ₹7,296 crore is more than that of the profits of top two players, Jio and Airtel, combined.

In fact, Jio made nearly three-times the profits that Airtel did, despite having only 16% more subscribers than the latter – showing that the telecom war it started in 2016 has hurt the industry more than itself.

Vodafone Idea lost $10 million every day in Q1 FY23 – more than the profits of Jio and Airtel combined.


While Jio is ahead of it in profits, the oldest player Airtel is still ahead of it in terms of margins. Airtel leads the pack when it comes to the amount of revenue that each subscriber contributes on an average (ARPU).

While Airtel has been the market leader in this regard for a long time now, Jio is fast catching up, while Vodafone Idea is still far behind.


Together, Jio, Airtel and Vodafone Idea account for over 1 billion subscribers – just marginally lower than the population of the US and Europe combined.


Jio’s decision to skip the 2G and 3G technologies and jump straight onto the 4G bandwagon is now helping it reap rewards that its rivals can only dream of.

Airtel is its closest competitor in terms of subscribers, profits, ARPU and other metrics – and yet, despite having nearly 86% of the total subscribers that Jio has, Jio’s 4G subscriber base is more than double of Airtel’s.

Together, Airtel and Vodafone Idea have less 4G subscribers than Jio – for every four 4G subscribers that Jio has, Airtel and Vodafone Idea together have only three.


Why does this matter? For starters, this metric reflects how much data each subscriber consumes, and since data services are more expensive when compared to voice, it results in higher revenue and profits.

This is visible in the average data consumption metrics, where Jio dominates with Airtel a close second, and Vodafone Idea a very distant third. It is also worth noting that Airtel and Vodafone Idea’s numbers are only applicable to subscribers who use data services – this does not apply to Jio, since all its subscribers are on 4G.


Even in terms of voice usage, Vodafone Idea is far behind both Airtel and Jio.

The road ahead for the telecom sector

Regardless of how telecom players performed in FY22, there is a wide consensus among analysts and the telcos themselves that tariff hikes are coming – both Airtel and Vodafone Idea have admitted this in their latest investor calls.

“We expect ~15% tariff hike by telcos in the near term to compensate for near term cash outflows as most incremental 5G benefits of industry use cases are still at least two to three years away,” said a report by ICICI Direct.

This is partly due to the fact that the 20-25% hike in November last year has been absorbed completely now, and telcos need to increase their ARPUs. The recent 5G spectrum auctions are also another trigger for telcos to hike tariffs as they seek to offset the large capex outlay.

A report by IIFL Securities says that both Reliance Jio and Airtel could see a 12% growth in mobile revenue in the first six months of 2023 – the unsaid laggard is Vodafone Idea, which will continue to lose subscribers.

“Post spectrum auction, we expect the relative positioning of top two telcos – Jio and Airtel – to get strengthened further with churn odds for VIL increasing as the services coverage/capacity of Jio/Airtel would be better,” the ICICI Direct report added.

Analysts at Goldman Sachs sounded a bullish note, saying, “With our expectation of a tariff hike before end-CY22 and the additional benefit of lower SUC (spectrum usage charge) starting Sep ‘22, we forecast Bharti’s wireless segment to deliver 22% FY22-24E revenue CAGR.”

A Nomura report also said a 4% tariff hike would be sufficient to cover for the 5G spectrum wins.

There seems to be a growing consensus that Vodafone Idea will continue to weaken – with the 5G spectrum wins of Jio and Airtel, and Vodafone Idea’s relatively lackluster bids further cementing this theory.

Over the years, telecom industry has consolidated rapidly post the entry of $RELIANCE.NSE Jio. From 15 service providers, we are left with 4 with 99%+ market share. Post Jio's entry ARPU (Average revenue per user) fell from ₹300 in 2007 to ₹78 in 2017. $BHARTIARTL.NSE reported ARPUs of ₹183 in Q1FY23, a 2.7% increase QoQ. Over 5 yrs ARPUs will be back at ₹300. This time they are well poised with its 5g roll out plans and debt remains reasonable. $IDEA.NSE too saw improvement in ARPUs over last 4 Qtrs, ₹128 in Q1FY23, an 23% inc YoY. Though losses are widening with ₹7295cr in Q1FY23 vs ₹6549cr in Q4FY22. The company is losing market share. How they repay debt and recoup lost ground remains to be seen with lowest ARPUs among 3. Jio's ARPUs were up 24% and total customer base rose to 419.9mn vs 410 mn in last qtr. Standalone Profitability also up by 24% this Q. Going forward, it could be 2 horse race with Jio & Airtel having the financial muscle in this asset heavy sector.

— (@SOIC) August 10, 2022

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